Iran Signs First New Style Energy Contract with a Local Firm

The National Iranian Oil Company (NIOC) on Tuesday signed a new style output contract with an Iranian firm, a long-awaited template for new contracts it hopes will attract foreign energy investors back to boost output after years of sanctions.

By Parisa Hafezi

ANKARA, Oct 4 – The National Iranian Oil Company (NIOC) on Tuesday signed a new style output contract with an Iranian firm, a long-awaited template for new contracts it hopes will attract foreign energy investors back to boost output after years of sanctions.

“The first new model contract, the Iran Petroleum Contract (IPC), to develop the second phase of Yaran field also an EOR (enhanced oil recovery) and IOR (improved oil recovery) contracts for Koupal oil field were signed with Persia Oil & Gas Industry Development Co. (POGIDC) today,” the Oil Ministry’s official website SHANA reported.

SHANA said that the value of the contract signed on Tuesday is worth $2.5 billion. The Yaran oil field is in southwest Iran, near the Iraqi border.

“The Oil Ministry welcomes cooperation with all companies that can … help boosting Iran’s (crude) output,” SHANA quoted Oil Minister Bijan Zanganeh as saying after the deal was signed.

After reaching a landmark nuclear deal with six major powers in 2015, sanctions imposed on Tehran were lifted in January. OPEC member Iran seeks to raise its crude output to pre-sanction levels of 4 million barrels per day.

Iran, which needs foreign investment to develop its aging fields, has been trying to sweeten the terms it offers on oil development contracts to attract foreign investors deterred by years of sanctions.

Hardline rivals of Iran’s pragmatist President Hassan Rouhani have criticized the IPC, which ends a buy-back system dating back more than 20 years under which foreign firms have been banned from booking reserves or taking equity stakes in Iranian companies.

Oil majors have said they would only go back to Iran if it made major changes to the buy-back contracts, which companies such as France’s Total or Italy’s Eni said made them no money or even incurred losses.